Therefore, re-capitalizing banks, brokers, pawn shops, French bakeries or nail salons by issuing huge amounts of even more debt is simply not going to work. In fact, it will make matters worse when the whole thing inevitably comes crashing down.

Corollary: the only way to "save" an economy that relies on a self-destructive, vicious cycle of borrow-inflate-spend-borrow is to chuck it and replace it with a new macro-economic model. Period._______________________________P.S. If you want to find out the differences (and some similarities) between today's situation and 1929, this is the best book about the Crash, by far: The Great Crash 1929 by John Kenneth Galbraith

37 comments:

Hel,What makes you categorically rule out the possibility of the govt paying its budget shortfall with freshly minted money? I know it would lead to a run on the $ and imperil your much beloved American Imperium but so would the type of collapse that would result from the massive default on foreign debt implied by your suggested scenario of debt reduction. What makes one type of collapse preferable to the other?

Debt devaluation through inflation is more gradual, less humiliating and disruptive than formal repudiation, and an inflation tax is much easier to enact as congress needn't vote on it. With debt devaluation the US would still be able to borrow in foreign currencies but with formal repudiation even that avenue would be off-limits to it.

P.S. You never indicated the difference in recovery rates between CDS buyers who own the covered debt and those who don't on your last post. If there is a difference and you know what it is I'd be much obliged if you'd share.

The problem of course is that it will hurt. And at least one generation of snake-oil salesmen have taught Americans that their lot in this world is to spend and enjoy, as befits "the chosen people".

By the way:

The equity analysts' consensus still is predicting Q4 to be period of strong growth and 09 to continue more positive still. And the P/E numbers are soooo attractive..

Right. Of course their mathematic skills are American average.. P is current figure from market and the E is based more less in history. And as the E starts to sink towards zero, the P/E starts to approach the number, which is represented by the figure 8 pushed sideways.

George Carlin, We Miss You My FriendHere are the 7 "new" dirty words you cannot say on TV: shit, piss, fuck, Paulson, cocksucker, "Fractional-Reserve-Banking-System", and Bush

For centuries, there has been no distinction between MONEY and DEBT. In fact, without debt, as we all know, there is no money, no financial system. The system that, like a parasite, has lived off of its host and made a few people stinking rich while using duplicity, violence and murder to have its way in the world CANNOT BE REFORMED. It cannot. It either has to be thrown away and we have to start from scratch, or it has to continue ad infinitum until we have Warren Buffet the Quadrillionaire, the DOW @ 100,000, and global debt of 14 Septillion dollars. (14 Septillion = 14,000,000,000,000,000,000,000,000 dollars, in round figures of course).

But to have this continued growth, there can be NO MARGIN CALLS, no withdrawals from banks, no fiat currency....simply debt...and of course this CANNOT work. I know, capital "A" Absurd for me to even play this little game. Debt is only "money" if people believe that it is money. AND THAT IS WHY THIS CRISIS IS UNLIKE ANY WE HAVE SEEN BEFORE. This time, people are coming to the realization that debt actually ISN'T money. People are slowly beginning to realize that our global financial system is a usurious system in which bankers and other folks in the 'money' business are making trillions of dollars on the backs (that is, debt) of the common folk. You and me.

Spanky Paulson and his band off merry scumbags, and George W. Mussolini, and Warren "I'm Glad I'm Not Jimmy" Buffet, and all of these filthy stinking Lords of the Manor---all of these people must sustain the FRACTIONAL RESERVE system, or themselves face the masses, on the streets: the masses whom they have so willingly robbed and lied to and cheated and murdered, for all of these decades. Because if the system fails, THEY are the ones who are going to be brought to justice. I'm sure Spanky Paulson and Ben "the douche bag" Bernanke, and ALL of the scumbags in Congress, and George W. Mussolini, and his sidekick Dick "fuck 'em all, and fuck 'em hard" Cheney---I'm sure these guys are losing a little sleep these nights imagining what could be in store for them in the future if the system goes splat.

That's why all of these criminals are spending all of OUR money, trillions and trillions of our tax dollars, so that they can (a) get richer and (b) make sure that the system from which they alone benefit does not fold. And all along they will lie and dissemble and tell us all it is for OUR good that the global financial system not collapse. And they have to say that, because if we THE PEOPLE (Remember that cute little phrase, "We the People"?) ever, en masse, came to the realization that we could survive WITHOUT the Fractional Reserve System---that we could start a anew, and build a new, sustainable world free from billionaire-ism---then they---the rich, that is--- would be up shits creek.

The only 'problem' with Galbraith's book on 1929, is that the explanation is so simple, and so well crafted, that well educated persons would be completely incapable of understanding it! They, together with politicians and many other so-called 'experts' construct a personal reality through the filter of their own moral, ethical and absolutely true views, opinions, beliefs and ideas!

Hence, the residue, (aka. the rest of us contrary folk), are axiomatically 'wrong', no matter what we say!

There was also a 'crash' of sorts in the 1870s - anyone have information on it?

@Hell,Don't bother reading Galbraith. The guy is a Keynesian quack. If you want to understand the origins of this mess and why Mises and Hayek predicted the Great Depression (Keynes didn't see it coming, that is why he lost half his wealth!), you should inform yourself on the "Austrian Theory of the Trade Cycle". Go, have some fun, Keynesian! http://www.mises.org/tradcycl/austcycl.asp

Throw in massive leverage and the situation is more like a raging wildfire going off in all directions. What is evident is the speed at which the credit deflation is cutting through the asset classes making the gov't bailout's look weak and ineffective.The players that have or currently using large amounts of leverage arepretty easy to spot these days!

The 1870s crash was every bit as bad as the GD, but as it was a different world then, things did not evolve as they did sixty years later. For a discussion on how the 1870s Panic is far more like today's disaster than '29 read the article at the link.

http://www.itulip.com/forums/showthread.php?p=52465

I agree with Dan W by the way, there is no tinkering with the present decrepit and corrupt system. It must be discarded lock, stock, and barrel. Having said that, it won't be until we have no choice.

Yes, well, I definitely agree with your eminently REASONABLE and RATIONAL discussion of the situation.The problem is that we live in a society which, while constantly harping on the necessity of being REALISTIC and REASONABLE, has been living in cloud cuckoo land for quite some time now.No one wants to see things get as bad as the Great Depression. Our economic situation is SO catastrophic largely because of the Great Depression and its effects on the following generations in terms of building up guarantees to make sure that it wouldn't happen again.So... what's the answer ? I have no idea.I personally favor our wholesale recognition of the fact that this crisis goes way beyond the stock market, and touches the very nature of the capitalist market system, including the monetary system.I think that we should go for it in terms of utopia. What do we have to lose ?This reminds me of a book I read a couple of years ago, "Touching the Void", by an experienced mountain climber who found himself in the situation of having actually to CLIMB INTO A CREVASS in order to find his way out of his desperate situation.Pretty utopic, huh ?Not REASONABLE at all ?But it saved his life in the end...

Since I probably come across as a crank on this blog (and after all, I suppose that I really am a crank in most senses of the word..), I'll add one more point :I hate us/them analyses.I think that we are all in this together, and that John Q. Public, in his own quiet way, has been doing his very best (effects guaranteed by exponential numbers of John Q. Public) to keep the system alive.

I don't believe today's situation is exactly like 1929 or any other crisis before this (1873, Argentina, Russia, Japan, etc.)

The main reason I say that is because the US dollar is the world's reserve currency -- so I think this will be a much worse crash if the dollar collapses -- for us in the USA at least. I guess it would also affect those who have the most US dollars in their official reserves too.

"Fractional reserve banking must be reined in by higher reserve requirements, rising over time perhaps to 100 percent. If banks were true financial intermediaries, they would not have money creating power, and the proliferation of debt relative to wealth would be reduced."

Today, I believe Keynes is mostly outdated, if only because a world of 7 billion can no longer borrow and grow its way out of trouble.

One of the hallmarks of Keynesianism was the idea that states should use deficit spending to grow an economy out of a (deep) recession. However, it is also true that Keynes said that surpluses acquired during bullish times should be used to pay off such debts.

I thought about writing about this last night, but stopped short. The tendency of elected officials to ignore this tenet and instead cut taxes -- by putting forth the argument that it's "your money" -- I think shows the greatest weakness of Keynesian thought.

The problem is one where ideology meets realpolitik.

I actually think Keynes was theoretically correct. The real problem is that Keynesianism does not take into account human psychology. You might think of it as a kind of "Optimism Bias."

The debt economy is based on chasing yield. Pension funds, financial institutions and individuals are all chasing yield. Moreso because many are facing retirement.

What individuals and retirees forget is that you cannot live on yield, it is principal that must be nibbled away.

Until individuals can face up to the fact that they cannot live on the proceeds of debt and need to fully fund their retirement, they are always going to be prey to ponzi schemes, whether they be Calpers, or Berkshire Hathaway.

"The US will not pass the test if it has no moral compass. Religion has managed to guide the US over Nazism, slavery, and British exploitation."

Religion never stood in the way of slavery or British exploitation, or Nazism, the point being that morals don't derive from from religion, despite the claims of certain zealous adherents of Islam, Christianity, and Judaism, to name three of the world's more prominent organized faiths. I suggest some reading that includes Dante's Inferno and Christopher Hitchens's, God is not Great, would be helpful.

And this:

"The future bodes ill if all we have expediency and a mystical faith in the goodwill of our fellow man to guide us. We will simply extend abortion to removing unwanted adults."

I love how abortion rights are twisted into a sinister step down the slippery slope of euthanasia. That's worthy of Karl Rove.

And, yes, by all means, lets substitute " a mystical faith in the goodwill of our fellow man" (I'm not sure who has this mystical faith) into a mystical faith into, as Gore Vidal dubs it, a sky-god.

"Mark my words: there is more to this crisis that has not fully unfolded yet."

I submit that here is a big piece of that which you refer to.

From: http://market-ticker.denninger.net/

I just had to coin a new word.

Audacity + Fraud = Fraudacity.

John Mack yesterday in a CNBC interview said that the capital deployed by Treasury into the banks was going to rebuild their capital ratios - not be lent out. In other words, they intend to hoard it.

This means, bluntly, that not one nickel of benefit will be seen by Main Street, despite claims by Paulson, Bush and others that this bailout is necessary for "Main Street, not Wall Street."

Liars.

Never mind that Bloomberg is reporting that the so-called "executive compensation limits" that Paulson is touting mean little or nothing:

"Oct. 15 (Bloomberg) -- Goldman Sachs Group Inc.'s Lloyd Blankfein, whose $70.3 million paycheck made him Wall Street's most highly compensated chief executive officer last year, could still earn tens of millions annually under the bank-rescue plan run by his former boss, Treasury Secretary Henry Paulson."

Very nice. So the taxpayers hand out billions and the executives still rake it in.

Where is the accountability?

CNBC's Fast Money finally started talking about the outright fraud and lies last night. Dylan Ratigan was absolutely on fire about the fact that Paulson was in fact one of the executives lobbying hard for removal of leverage limits in 2004, just two years before he took the position at Treasury (and cashed out $500 million in Goldman Sachs stock tax free.)

I and a few others have been peppering the media with this, and finally, someone woke up to the fact that the very same people who made this mess now want we the taxpayers to pay for cleaning it up - after they ran off with all your money!

Never mind that its unlikely to work.

Nor does it stop there. AIG continues to draw on their "credit line" with The Fed. Inquiring minds want to know a few things here, chief among them being why suddenly is there $80 billion of hard money required in a business that is "fundamentally sound" in excess of cash flow, and where that requirement did not previously exist.

I'm suspicious as hell on this one guys, and my suspicion generally points in the direction of Lehman's Credit-Default Swaps.

The claim by the DTCC and ISDA is that the total "actual exposure" is somewhere in the area of $6-8 billion once all the contracts have netted out.

Let's examine this, because it leads to only two possibilities, both of which are extremely uncomfortable.

First, if the claims are correct: Then the entire CDS game is one gigantic high-finance version of "pick pocket."

That is, you come to me for a CDS on Lehman. I charge you $100,000. Then I immediately go find someone who will sell me the same contract for $90,000. I have now "picked your pocket" to the tune of $10,000, and (theoretically anyway) I have no risk. This continues until the last sucker says "no mas!" on a cheaper price, at which point that particular chain of CDS come to a close, until the next buyer shows up.

If this is the essence of the CDS game then the entire scheme and the dealers' insistence on keeping these things off a public exchange is an artifice with intent to defraud. Why? Because by keeping bid/ask and O/I hidden these banks are able to continue to play this game of "steal from the guy you sell to by obscuring the price"; indeed, that is the essence of the trade! This market doesn't exist to make a market or to set a price for risk, it instead serves as nothing other than a high-finance looting operation with everyone putting in the maximum effort to obscure market facts so as to be able to maximally exploit the customer!

Why do I make this charge? Because there were allegedly $600 billion worth of contracts written on Lehman. If only 1% of that turns into real money needing to be paid out, and recovery on the bonds was literally under 10 cents, then the actual "notional at risk" was $540 billion. As a result we have almost none of the market being used either to insure actual bonds or to place bets on the firm's demise (or health) - essentially the entire CDS marketplace exists to do exactly one thing - steal from the buyers of this "protection"!

If I ran a place that was called a "Tavern" but 99% of the people who were there in fact came to deal cocaine, and only 1% of the people purchased drinks and food to be consumed in my "establishment" I'd be instantaneously raided and shut down by the cops, and with good reason. I would be operating a criminal enterprise - despite calling what I'm doing "serving food and adult beverages", in point of fact I was providing cover and concealment to a highly-illegal enterprise that was engaged in a prohibited activity. Ditto if my alleged "Tavern" was in fact cover for a bookmaking operation and again, 99% of my "activity" was in fact illegal sports betting while 1% was the sale of alcohol and food.

If the ISDA and DTCC claims are correct this is the fraud of the century and every bank and institution involved in it needs to come under immediate federal indictment.

The other possibility is more ominous - ISDA and DTCC are lying, and in fact there are hundreds of billions of dollars in real claims that need to be paid off next week.

The latter explanation happens to (inconveniently) fit with AIG suddenly needing $80 billion worth of actual money. See, AIG's derivatives desk is known to have written CDS on damn near anything or anyone in considerable size. It was a very profitable part of the operation while the music continued to play, but now it has imploded on them, as all overly-leveraged schemes eventually do.

If this explanation is correct then we have a whole different set of problems. In that case the obvious question is whether OTS was complicit in allowing a regulated institution's wholly-owned subsidiary with recourse to the parent to lever up to a degree that vastly exceeded any reasonable standard of prudence under banking and insurance regulations. The implication there is that we had willful and intentional refusal to enforce banking and insurance regulations on both a state and federal level, because AIG was in fact a regulated entity - this was no hedge fund!

The latter scenario also leads one to question whether the $80 billion drawn thus far is in fact going to pay off hedge funds who made bets on Lehman's collapse! If so then this is a further outrage, in that these firms bought these "swaps" from an entity that was insolvent at the outset of writing them, and the idea of the government stepping in to protect hedge funds from bets they made with a firm they knew didn't have the capital to pay is beyond outrageous, not to mention a raw fleecing of the taxpayer to cover the bets of an illegal and under capitalized casino that was enabled and powered by willfully-blind regulators!

Either way we've got a problem with the only real question being exactly who has been lying to whom, where we need to point the Federal Prosecutors, and from whom we should seek to disgorge the ill-gotten gains with Civil RICO (Racketeering) lawsuits.

There's more fraudacity to explore, but this should give the prosecutors plenty to start with.

Do you think we can find one or two somewhere in this country that aren't actually in bed with the fraudsters?

"Mark my words: there is more to this crisis that has not fully unfolded yet."

I submit that here is a big piece of that which you refer to.

From: http://market-ticker.denninger.net/

I just had to coin a new word.

Audacity + Fraud = Fraudacity.

John Mack yesterday in a CNBC interview said that the capital deployed by Treasury into the banks was going to rebuild their capital ratios - not be lent out. In other words, they intend to hoard it.

This means, bluntly, that not one nickel of benefit will be seen by Main Street, despite claims by Paulson, Bush and others that this bailout is necessary for "Main Street, not Wall Street."

Liars.

Never mind that Bloomberg is reporting that the so-called "executive compensation limits" that Paulson is touting mean little or nothing:

"Oct. 15 (Bloomberg) -- Goldman Sachs Group Inc.'s Lloyd Blankfein, whose $70.3 million paycheck made him Wall Street's most highly compensated chief executive officer last year, could still earn tens of millions annually under the bank-rescue plan run by his former boss, Treasury Secretary Henry Paulson."

Very nice. So the taxpayers hand out billions and the executives still rake it in.

Where is the accountability?

CNBC's Fast Money finally started talking about the outright fraud and lies last night. Dylan Ratigan was absolutely on fire about the fact that Paulson was in fact one of the executives lobbying hard for removal of leverage limits in 2004, just two years before he took the position at Treasury (and cashed out $500 million in Goldman Sachs stock tax free.)

I and a few others have been peppering the media with this, and finally, someone woke up to the fact that the very same people who made this mess now want we the taxpayers to pay for cleaning it up - after they ran off with all your money!

Never mind that its unlikely to work.

Nor does it stop there. AIG continues to draw on their "credit line" with The Fed. Inquiring minds want to know a few things here, chief among them being why suddenly is there $80 billion of hard money required in a business that is "fundamentally sound" in excess of cash flow, and where that requirement did not previously exist.

I'm suspicious as hell on this one guys, and my suspicion generally points in the direction of Lehman's Credit-Default Swaps.

The claim by the DTCC and ISDA is that the total "actual exposure" is somewhere in the area of $6-8 billion once all the contracts have netted out.

Let's examine this, because it leads to only two possibilities, both of which are extremely uncomfortable.

First, if the claims are correct: Then the entire CDS game is one gigantic high-finance version of "pick pocket."

That is, you come to me for a CDS on Lehman. I charge you $100,000. Then I immediately go find someone who will sell me the same contract for $90,000. I have now "picked your pocket" to the tune of $10,000, and (theoretically anyway) I have no risk. This continues until the last sucker says "no mas!" on a cheaper price, at which point that particular chain of CDS come to a close, until the next buyer shows up.

If this is the essence of the CDS game then the entire scheme and the dealers' insistence on keeping these things off a public exchange is an artifice with intent to defraud. Why? Because by keeping bid/ask and O/I hidden these banks are able to continue to play this game of "steal from the guy you sell to by obscuring the price"; indeed, that is the essence of the trade! This market doesn't exist to make a market or to set a price for risk, it instead serves as nothing other than a high-finance looting operation with everyone putting in the maximum effort to obscure market facts so as to be able to maximally exploit the customer!

Why do I make this charge? Because there were allegedly $600 billion worth of contracts written on Lehman. If only 1% of that turns into real money needing to be paid out, and recovery on the bonds was literally under 10 cents, then the actual "notional at risk" was $540 billion. As a result we have almost none of the market being used either to insure actual bonds or to place bets on the firm's demise (or health) - essentially the entire CDS marketplace exists to do exactly one thing - steal from the buyers of this "protection"!

If I ran a place that was called a "Tavern" but 99% of the people who were there in fact came to deal cocaine, and only 1% of the people purchased drinks and food to be consumed in my "establishment" I'd be instantaneously raided and shut down by the cops, and with good reason. I would be operating a criminal enterprise - despite calling what I'm doing "serving food and adult beverages", in point of fact I was providing cover and concealment to a highly-illegal enterprise that was engaged in a prohibited activity. Ditto if my alleged "Tavern" was in fact cover for a bookmaking operation and again, 99% of my "activity" was in fact illegal sports betting while 1% was the sale of alcohol and food.

If the ISDA and DTCC claims are correct this is the fraud of the century and every bank and institution involved in it needs to come under immediate federal indictment.

The other possibility is more ominous - ISDA and DTCC are lying, and in fact there are hundreds of billions of dollars in real claims that need to be paid off next week.

The latter explanation happens to (inconveniently) fit with AIG suddenly needing $80 billion worth of actual money. See, AIG's derivatives desk is known to have written CDS on damn near anything or anyone in considerable size. It was a very profitable part of the operation while the music continued to play, but now it has imploded on them, as all overly-leveraged schemes eventually do.

If this explanation is correct then we have a whole different set of problems. In that case the obvious question is whether OTS was complicit in allowing a regulated institution's wholly-owned subsidiary with recourse to the parent to lever up to a degree that vastly exceeded any reasonable standard of prudence under banking and insurance regulations. The implication there is that we had willful and intentional refusal to enforce banking and insurance regulations on both a state and federal level, because AIG was in fact a regulated entity - this was no hedge fund!

The latter scenario also leads one to question whether the $80 billion drawn thus far is in fact going to pay off hedge funds who made bets on Lehman's collapse! If so then this is a further outrage, in that these firms bought these "swaps" from an entity that was insolvent at the outset of writing them, and the idea of the government stepping in to protect hedge funds from bets they made with a firm they knew didn't have the capital to pay is beyond outrageous, not to mention a raw fleecing of the taxpayer to cover the bets of an illegal and under capitalized casino that was enabled and powered by willfully-blind regulators!

Either way we've got a problem with the only real question being exactly who has been lying to whom, where we need to point the Federal Prosecutors, and from whom we should seek to disgorge the ill-gotten gains with Civil RICO (Racketeering) lawsuits.

There's more fraudacity to explore, but this should give the prosecutors plenty to start with.

Do you think we can find one or two somewhere in this country that aren't actually in bed with the fraudsters?

Back to you Eduardo on religion. I submit that it was Hitler's attack on religion, both Jewish and Christian that formed the core of power. It was those in the US with religious conviction to remove Nazism that finally overcame this scourge.

The US was in large part founded on refugees from religious persecution. Anti-slavery efforts that removed it were based on religion. There may have been religious people that stood idly by, or those moslems in Africa that ran the slave trade.

The point is that not all religions are alike, and that absent religion, there is no other force that will overcome tyranny. And yes, some religions are tyrannical.

I like how Hellasious tantalizes us with "Mark my words: there is more to this crisis that has not fully unfolded yet." My guesses: more government money pumped in, higher taxes than we expect, banks continuing to hoard cash, housing prices falling even more, significant inflationary forces on the dollar sometime in the near future.

@printfaster: As a descendant of slaves, I would disagree that religion was the main force behind Abolition in Britain and the US. In the late 1700's Judaeo-Christian society and its leaders had been around for thousands of years and had not made any widespread effort to abolish slavery anywhere in the world. A change of thinking in the Western world, The Enlightenment (aka Age of Reason) had a dramatic influence on Western thought at the time and even on our Founding Fathers. Quakers, now considered a cult by most Chrisitians, were the earliest Abolitionsists, other Chrisitian denominations eventually followed. A societal change in Western thinking first, then a vocal minority that slowly grew in numbers, then Christians reconciling Abolitionist thinking with Biblical teachings. By the time the Abolitionist movement gained strength in America before the Civil War, American memories of being religous refugees was many generations in the past (it would cause empathy though!) I'm not sure that religion is required (although it can be a strong motivator for good or evil) to fight tyranny. The French Revolution might be a good example of a secular fight against tyranny.

Leviticus specified that it was lawful to keep slaves for only six years, during the seventh, the slave had to be freed (if he/she desired, because not all slaves during Antiquity were faced with the treatment found in the fields on American plantations.)Judaism's treatment of the issue of slavery was very complicated, and very very codified.

Little old naïve me : I thought that if you put your money into a bank, it was to store it there.The primary purpose of banks (in most people's minds, not bankers' minds, mind you) is to HOARD MONEY. It shouldn't suprise anyone that banks have a tendency to...hoard money.

There is an important study to make on the collusion between Catholic and Jewish authorities in setting up the premises for a banking system that lends "with interest", because the Catholic Church was formally opposed to lending money while charging interest, and for very sound theological reasons that have bearing on this crisis.That said, it nevertheless tolerated and encouraged the erection of a Jewish merchant class whose only activity was to lend money while charging interest.

Incidentally, it becomes evident with this last statement that one of the features of Hitler's paranoïa -- the idea that Jewish bankers and financiers were controlling the country -- stems from an historical observation. Not enough attention has been paid to this nasty little arrangement between Jewish and Catholic orthodoxy on this very very important issue.

And please forgive me for expressing the unpardonnable but...a brief read through Mein Kampf (no, the 600 pages taken all together are really indigest and not recommended) gives a glimpse into the psyche of a young man who spent a good deal of time reflecting on economic issues, had pertinent and sometimes empathetic reactions (he was outraged by the exploitation of the working classes, for example), and was definitely NOT a monster, for all our prejudices at this time.I regret that our intellectual shortsightedness has made it impossible to open up this book in order to try to understand the society that helped produce it.

Re: Permagrowth- it seems we've seen enough dead bacteria in enough petri dishes to show this isn't a good path to follow. Oh sure, its fun during the exponential growth....then suddenly the situation changes. And I don't believe homo sapiens can spore.

Yoyomo: Have you ever tried eating any of this freeze-dried stuff? I'm seeing a lot of intriguing claims, but I haven't dug deep enough to overcome innate skepticism. One website has a $250 minimum order since demand is so high. Doesn't seem like I'm the only paranoid person out there right now.

Edwardo: So now the anti-golders are saying the US gov has intentionally shut down thousands of gold mines. And that other govs are downplaying how much gold they have. So we get out the the US$ due to printing dilution only to find ourselves in gold with mining dilution.

Anon: During the Age of Reason the Notre Dame cathedral was taken over and called the Temple of Reason. I felt a little weird visiting Notre Dame until I read that. Also, underneath is an archeological site you can visit from when the Romans were in power. Provides nice perspective...

Religion: Six years is not okay. Ridiculous. Thou shalt not eat burrow owls, but thou may enslave people for arbitrary amounts of time.

I think that our love of pets is drafting off our genetic tendency to love our small offspring (but its harmless and I indulge).I think that our belief in religion is drafting off our genetic tendency to revere and obey our parents. It makes sense for children to have this instinct for protection until they're old enough to have the logical capacity for self-survival. But religion doesn't allow for the obedience to dissolve; the adherent never reaches their critical thinking potential (not harmless and I don't indulge).

Have you given a thought to composting ?I think that if we all did this, our perspectives on a lot of things would change.

Edwardo : please abandon any attempts to intimidate. Oops, your single vision is showing...Yes, Adolph Hitler was empathetic. Yes, he visited workers' homes when he was himself down and out in Vienna.Your single vision prevents you from getting a grip on just what enabled this extremely charismatic man to appeal to so many people.

To divorce political or social rights from moral obligations perverts and corrupts freedom. Christ himself teaches us “Render unto Caesar what is Caesar’s”—not because every Caesar deserves it, but because Caesar’s concern is not with the most important thing in our lives.Wall Street in 1792, 1819, 1836, 1857, 1873, 1893, 1907, 1929, 1987 and now 2008.Much like the 2008 meltdown, the 1836 crisis occurred after a huge real estate crash.In each case, Wall Street forgot that the laws of economics are as ineluctable as Newton’s law.

Sorry for getting so chatty on this blog, (I promise I'll shut up, at least for the next 10 hours or so while I'm sleeping.)

anonymous : You realize that Jesus said "Render unto Caesar that which is Caeser's" upon being presented with a Roman coin ?

I think that this is perhaps one of the only quibbles I have with Jesus's thought. I think that while he obviously realized the enormous potential of money to corrupt and pervert (inevitable potential in my book), he didn't stop to question the monetary system itself. But then, the nitpickers were trying to trap him, so maybe he was just trying to weasel out of a very difficult and dangerous situation.

Dink, I left you a note about Kunstler's site on the prior thread (toward the end). I've had freeze dried oriental noodles w/peas and the noodles and broth (add boiling water) were both very good but the peas were chewy. If you want to buy a small sample package go to a hunting/camping sportsman's shop; many of them sell freeze-dried camping supplies. Vacuum packing (or injecting an inert gas, maybe nitrogen) prevents rancidity for long-life products.

@Ben- thanks for the Martenson link. I just finished the last of the videos (and eagerly await #20).

@Hell- having watched Martenson's crash course, I think I understand your points on permagrowth a whole lot better. But the solution seems even more elusive, for to concur with okie in the failure of those in economics, engineering and finance to recognize the fundamental basis of human behavior and evolutionary psychology, how is a society to solve the tragedy of the commons when the solution is perceived as zero sum?

Resolving the tragedy of the commons has always been about finding a non-zero sum solution. Game theory is quite clear that zero sum solutions ALWAYS leads to war.

Certain groups of humans are going to have to gang up on other groups of humans, it is that simple.

Holy Ponzi! I am getting an education here! Thanks for that "Total debt as a percentage of disposable income" graph. I had no idea it was that bad. Sadly, I cannot summon one shred of optimism that we will be able to have the fortitude to ""save" an economy that relies on a self-destructive, vicious cycle of borrow-inflate-spend-borrow is to chuck it and replace it with a new macro-economic model

I realize that this thread is several days old, but there's something in the originating post that is so obviously wrong that I must reply. I read this post by Hellacious a couple of weeks ago, and cannot let this pass.

The offending claim is that "money is debt, and debt is money."

No sir, it is not. Credit is debt; money is an asset. Or it should be.

The thing about debt, or credit, is that it is an obligation that must be satisfied by the ower of the debt.

Suppose that there was a currency, based on the total value of the economy of a nation, that had no debt encumbrances. A bill of $100, say, represented $100 of the nations wealth. Not a "note", but plain old money.

You got close to this not long ago with the "Greenback" post, except that you tied it to energy production. It should be tied to the total production of the country, including the total value (however hard to determine) of the infrastructure.

For hundreds of years, people used gold and silver as currency, because they could trade that gold or silver for other objects that they sought to purchase.

But the primary problem with gold/silver as a basis of currency is that the entire amount of currency is tied to the pile of gold or silver on hand in the Treasury of the nation. There is no way, using this system, to represent the real gains in the economy.

I fully realize that this method of producing the trading chits of the nations has been around for several hundred years, and most people are loath to change it.

But change it we must because the mathematics of the present system will cause the monetary units to become severely diminished in the near future. Reality will not be denied, even if postponed for 500 years.

There is a solution to be found in the US Constitution, which gives to the Congress of the United States the power to coin the money of the United States. This is one of the main reasons why the American Revolution took place--over who shall have the money power. We are back to this again.

About Me

I was educated as a chemical engineer but spent almost my entire career in finance, particularly in money, FX and bond markets. The name stands for Hell-as-IOUs and the picture points to Quixotic endeavors.